Case 2. New Economic Models for Regional News

 

1. About

The newspaper business has never been simple, but its dual business model has typically been straightforward: on the one hand, compile news and information for which readers pay in time and/or money, and then, on the other hand, also sell their attention on to advertisers looking to connect with customers. Through the 20th century that approach proved pretty robust and, in the main, profits flowed like ink with leading UK regional newspapers routinely posting 30 per cent margins. No longer. The industry’s health, under pressure since advertising share started slipping in 2005 (Kirwan, 2009), continued to worsen into 2012. Circulation, advertising revenues and profit margins all fell taking staff numbers and even entire operations down with them.

The prognosis is grim and the prescribed remedies are sometimes drastic. Speaking to a media convention in 2008, then UK culture secretary Andy Burnham was blunt:

The old media world has ended and the sooner we say so the better. With it must go old thinking. But the difficulty we all have is this: it doesn’t yet feel like an era of new possibility, and change we can all believe in, but one of threat and decline. My main message today is: we need to break out of this thinking and we can*but only if we look beyond our own backyards and see the bigger picture. (2009, p. 1)

That UK regional newspapers need to look beyond their ‘‘backyards’’ and consider new ways of thinking about their business models has been clear for some time. That they also intend to do so is suggested by the upbeat headline to the news release announcing the Newspaper Society’s annual report for 2008_9: ‘‘Local Newspapers Evolving into Successful Multimedia Businesses’’ (Newspaper Society, 2009). Just how they have gone about that and to what extent these activities could be considered indicators of a ‘‘new way of thinking’’ is the key theme of this case study of new business models for the regional press, which is a key area of interest to those concerned with sustainable societies, in general, and to NEMODE, in particular.

2. Background

The UK regional newspaper pioneers began publishing in the first decade of the eighteenth century; by 1800 there were about 100 titles, all weekly; by 1900 there were about 1300 weeklies, 70 morning papers and 100 evening papers. This was the high-point of the regional press in terms of titles published, but readership continued to increase in the first half of the twentieth century to its peak in the 1950s, when there were approximately 25 morning papers, 75 evenings and 1200 weeklies, selling a total of 22.5 million copies per issue (Royal Commission 1947, Hobbs 2012).

Though there has always been some churn, the total number of newspaper remained relatively stable at around 1300 in total until 2007, which was also the year that:

  • telecoms watchdog Ofcom announced that half of UK households had access to broadband and that effective competition was driving up speeds
  • the UK start feeling the affects of what was to become known as the Global Financial Crisis, which is thought to have been triggered by the US housing crisis of 2006.

Apple launches the iPhone (released in June 2007 in the US, November in the UK), the pioneer of what is to become known as smartphones.
The following year, leading industry analyst Clare Enders pointed out that 10-15 regional and local newspaper titles were closing each week and predicted that a third of all UK regional newspapers would have folded by 2013 (Oliver 2008).

As 2012 draws to an end, her predictions may appear to have been overly pessimistic. More than 240 titles have shut and 70 new titles have been launched over the past five year (Oakley 2012).

As such, in 2012 there are 79 daily regional titles and 1,083 weeklies (Newspaper Society 2012; the distinction between morning and evening titles has disappeared as most evening titles have switched to overnight printing to save costs);. Though the total decline has been around 15 per cent, dailies have been most affected with the total number dropping by 20 per cent as titles, such as the Liverpool Daily Post and Birmingham Post, move to weekly publishing. This is a trend that many see continuing (Oakley 2012, Highfield 2012).

 

 3. Critical Perspective

Researchers (Nel 2010) have pointed out that while few concepts in business today are as widely discussed as the concept of business models, it is also a concept that is often misused (Picard, 2000), poorly understood, particularly in the context of the Web (Rappa, 2001), and seldom systematically studied (Weill et al., 2004).

A major obstacle in classifying digital business models is that many are still evolving, changing rapidly and dynamically (Wang and Chan, 2003). Evolving digital business models may render the taxonomy of today obsolete tomorrow. Those wanting to understand the range of perspectives on businesses models are advised to step back from the business activity itself to look at the basis and the underlying characteristics that make commerce in the product or service possible (Chaharbaghi et al., 2003). These scholars argue that an essential first step is to acknowledge the models we employ are rooted in the underlying assumptions and context that govern their creation: ‘‘It is this relationship that determines the meaning, legitimacy and impact of models’’ (2003, p. 372). They observe business model waves which they liken to Kuhnian paradigmatic shifts, where ‘‘a series of peaceful interludes [is] punctuated by intellectually violent revolutions’’ (Kuhn, 1996). They note that in both science and business one conceptual worldview periodically replaces another and that, ‘‘as with all successful business model waves, what emerges is a view on how best to conduct business, an ideal, which promises a panacea to current business developments and pressing problems’’ (Chaharbarghi et al., 2003, p. 372).

Against that background, they propose a meta business model consisting of three interrelated strands: (1) the way of thinking; (2) the operational system; and (3) the capacity for value creation. The researchers caution that while the distinction of each is essential for explaining the concept of business, using each of these strands ‘‘will lead to a dead end’’ (Chaharbarghi et al., 2003, p. 375).

With that in mind, an exploration of the changing business models of newspapers would need to consider not only the activities in which the companies are engaged, but also the mindsets that inform them and how the context influences the outcomes of those efforts.

Read more…

Pressed to change. Case Study